by Paul B.W. Miller and Paul R. Bahnson

Some of you may remember our May 20-June 2, 2002 column in which we listed 12 reasons to create major changes at the American Institute of Certified Public Accountants, beginning with new top management. Based on things that have happened since then, we now add two more reasons.

First, emails supporting what we had to say show that many of you are just as fed up as we are, maybe even more so. One writer let us know that he had resigned from the institute several years ago because he could no longer tolerate what his dues were being used to accomplish. He more or less called us to task for not urging others to do so. Well, we hear you -- you clearly have taken a principled route in withdrawing your financial support.

But, herein lies the 13th reason for calling for a shakeup among the AICPA management and council: their activities have caused the wrong people to purge themselves from the institute’s rolls. Instead of driving away the bottom 5 percent by making them uncomfortable in the company of ethical accountants, the management has driven away the members who are the most committed to ethical behavior. This race to the lowest common denominator has to stop now, but that won’t happen unless there are drastic changes at the AICPA, starting with new management.

As to the 14th reason, we first provide a quote from a news story about the Sarbanes bill that would introduce some reforms in accounting practice and governance in order to at least do something about reducing the likelihood of other Enrons. These words went out under a byline from the Los Angeles Times: "Sarbanes’ bill ‘could result in serious, harmful consequences for capital markets and American business,’ said the AICPA, the industry lobbying group. ‘The draft legislation would add unnecessary and nonproductive costs to businesses and impose a duplicative regulatory burden.’ The group said recently that Sarbanes’ legislation ‘would result in a de facto government takeover of the accounting profession’ and urged members to contact their senators to oppose it."

Three things stand out. First, did you notice that the AICPA was identified as "the industry lobbying group"? The writer did not describe the institute as the premier professional society that is striving to raise the bar and upgrade the profession’s integrity and service to the public. The writer also did not describe it as the prestigious organization working with legislators and regulators to root out the causes of Enron and other financial reporting frauds and failures to keep them from ever happening again. The institute was also not described as the frontline enforcer working diligently to investigate the ethical failings of its members and to bring the hammer down in order to see that justice is done and to assure the public that its interests are being protected. Nor was it described as working to isolate bad individuals in order to restore the reputations of the rest of us who would have never done what the Enron parties did.

Instead, the institute is described as "the industry lobbying group." The previously respected public accounting profession is now nothing but an industry, and the AICPA is known only for its ability to bring political pressure to bear on politicians to get a special interest protected. Bah!

In addition, did you notice that the institute management is still presuming to speak for all the members? This error is grievous because none of us has the right to express our point of view as anything other than exactly that. (Have you ever noticed the disclaimer on our column?) If the institute managers want to state their own opposition to the proposed changes, then they should do so while making it clear that they can speak only for themselves. They can speak for the larger group only if they have adequate evidence through a poll that their point of view is shared, but, even then, they can rightfully state only that the opinion is not shared by every AICPA member.

Of course, a poll was conducted last year on the issue of the new international credential. The outcome was a 63-37 ratio against the proposal, despite a massive campaign in favor of it. We see this result as an overwhelming rejection of both the proposal and management’s leadership. They are out of alignment with the rank-and-file members, but they just can’t get that fact into their heads and they continue speaking out as though they have an unquestioned mandate.

Our third point about the quote is the opinions attributed to the institute. The managers continue to claim that any involvement by the government will add costs and amount to a takeover of the accounting profession. They just don’t get it. For one thing, the current processes for accomplishing financial reporting and governing the profession has allowed huge frauds to occur, one after the other. They are also missing the point that a sizable portion of the public desperately wants the government to take a more active role in running the profession because the people who are currently in charge have created a huge mess. In effect, the institute’s managers are in denial, even pathological denial, that anything has ever been wrong or that Enron even matters.

Let’s make it clear -- the old ways were not that good and we shouldn’t pine for them. In addition, there is no possible route for returning back to the old ways. The only path open to truly professional accountants is a whole new approach, and the sooner we all take it the better off we’ll be. Given that this new world is coming, or, indeed, has already arrived, it behooves all of us to be working with legislators to shape innovative laws to help us get there. Digging in your heels and shouting "no!" at the top of your lungs is just no longer an option.

For any who think we have overstated the current situation’s seriousness, notice that dead body over there in the corner that used to be Arthur Andersen, the best of them all. The vultures have arrived and are tearing chunks out of its flesh. How can anyone really think that nothing bad has happened? Anyone, that is, except the people entrenched at the top of the AICPA.

So, there you have them -- two more reasons for major changes at the AICPA, beginning with the replacement of Barry Melanon and any others who assisted him in changing the AICPA from a respected professional society into an "industry lobbying group." We never needed that kind of leadership in the past and we certainly don’t need it now.

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